Refinancing Fees and Charges
What to Expect and How to Prepare
Refinancing can be a smart financial move, but it’s essential to understand the associated costs. This guide covers common fees and charges, helping you make a well-informed decision and budget accordingly.
Types of Refinancing Fees You Might Encounter
Refinancing comes with specific costs that vary based on the loan type, lender, and other factors. Here are the most common fees to expect:
Application Fees
Lenders often charge an application fee to cover the processing of your refinancing request. This fee can vary widely, so it’s important to ask your lender upfront.
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- Average Cost: $200 – $600
- Tips: Some lenders may waive this fee as part of a promotional offer, so be sure to inquire.
Valuation Fees
A property valuation is often required to determine your home’s current market value. The valuation cost may vary depending on your lender and property type.
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- Average Cost: $200 – $500
- Tips: Check if your lender includes this in the overall package or offers a free valuation as part of their refinancing promotion.
Settlement Fees
Settlement fees cover the administration costs associated with settling your new loan. This fee ensures the refinancing process is completed smoothly and all necessary paperwork is handled.
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- Average Cost: $100 – $300
- Tips: Not all lenders charge settlement fees, so it’s worth confirming with your chosen provider.
Exit Fees and Break Costs
If you’re breaking a fixed-rate loan early, your lender may charge break costs or exit fees. This can be one of the larger costs to consider, particularly if there’s a significant portion of your fixed term remaining.
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- Average Cost: Varies widely based on loan balance and time remaining
- Tips: Speak to your lender to understand the specific break costs and if you’re liable to pay them.
Lender’s Mortgage Insurance (LMI)
LMI may apply if your equity in the property is below 20%. Although it primarily protects the lender, the cost is passed on to you, the borrower.
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- Average Cost: Depends on loan amount and deposit size
- Tips: If possible, increase your equity to 20% or more to avoid LMI altogether.
Are Refinancing Fees Worth It?
While refinancing fees add to the cost, they can often be offset by long-term savings from a lower interest rate or better loan terms. It’s essential to calculate whether the fees are worth the potential benefits.
Consider Your Goals
FAQs: Refinancing Fees and Charges
Can refinancing fees be added to the loan balance?
In some cases, yes. Some lenders allow fees to be added to the total loan amount, but this means you’ll pay interest on them over time.
Are there any hidden fees to watch out for?
Always read your loan contract thoroughly. Hidden fees can include administrative charges or discharge fees from your previous lender.
Can I negotiate refinancing fees?
Some lenders are open to negotiation, especially if you have a strong credit profile. Don’t hesitate to ask if certain fees can be reduced or waived.
Take Control of Your Refinancing Journey
Understanding refinancing fees is a critical step in the refinancing process. Our expert mortgage brokers at Lagos Financial can provide personalised guidance, helping you make a confident decision.